Author: Dax McLean

When choosing between a secured loan or remortgaging, your financial situation will determine which is best for you.

Since both secured loans and remortgages are secured against your property, there is a risk of repossession in both types of loans if you struggle with payments.

So, whether you get a secured loan or remortgage, you first need to be sure that you can afford it – that’s the first step.

The second step is understanding your needs so that you can select a finance package best suited to them.

Secured loans vs remortgaging

In the case of remortgaging, the basic idea is that you are replacing an existing mortgage with a new one.

You can choose to remain with your present mortgage provider or switch to a different one.

Why would homeowners want to do this? It may be for the following reasons:

• Their initial mortgage offer has been terminated.
• They found a better deal with more competitive rates and flexible terms.
• They need more funds against their property (perhaps for debt consolidation or home improvements).

On the other hand, when you get a secured loan, you borrow extra money and do not replace your mortgage. People take secured loans for the following reasons:

• Consolidating debts.
• Home improvements.

Compared to mortgages, secured loans are riskier (from the lender’s view), so they also come with higher interest rates.

However, remortgaging might cost you more interest in the long run since repayments are sometimes spread over a longer time. This means that remortgaging might be a longer and more costly way to pay off your loan.

The loan is secured against your property in both cases, so you could risk repossessing your home if you don’t maintain your repayments.

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When are secured loans better than remortgaging?

A secured loan can be better than remortgaging in the following cases:

1. When you are struggling to show proof of your income. Maybe you have recently gone self-employed and cannot obtain a mortgage because those lenders require proof of income. In this case, a secured loan may be easier to find.
2.  When you want the money fast. Generally, waiting time from application to cash in hand is much quicker in a secured loan than in a mortgage.
3. When you have a bad credit score that mortgage lenders don’t like. With secured lending, lenders allow a much broader range of credit scores. However, some lenders focus on bad credit loans.

When are secured loans cheaper than remortgaging?

If you want to make a well-informed decision, it’s essential to calculate the costs attached to the different types of loans. For example, a secured loan can be less costly than remortgaging in some cases.

For instance, an early repayment fee could be payable if you remortgage before your current agreement terminates. Your mortgage lender will be able to let you know how much they would charge if you choose to remortgage early.

Confirm that this fee won’t surmount the money you can save by changing to a lower interest rate. You’re better off waiting for your agreement to terminate before you remortgage if it will cost you more.

It might be hard to remortgage if your credit score has dropped since you took out your mortgage.

Furthermore, you might face higher interest rates. The most competitive rates are reserved for those with the best credit scores, and lenders could be more hesitant to lend to bad credit.

As a result, it will be easier to find a secured loan than a mortgage if you have poor credit. Also, you would only pay a higher rate of interest on the extra money you borrow, not the entire mortgage.

So, the terms of your current mortgage would stay the same, and you simply pay the secured loan on top.

Keep in mind that you might be paying more interest in the long run by remortgaging since payments are spread over a longer period.

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

Will a secured loan affect remortgaging?

If you have a secured loan, you can still remortgage. But your eligibility for a remortgage depends on your financial situation and the lender’s standards. So they will first analyse your condition to be sure that you can make the repayments in time.

You can choose to remortgage for a larger sum to completely pay off the secured loan. Alternatively, you can switch to a new mortgage and keep making monthly payments to your mortgage separately.

If you currently have a mortgage and seek to take out a secured loan, you can choose from a few options.

You can apply for a further advance from your present mortgage lender if you hold sufficient equity in your home. However, your monthly payments will be raised to account for this loan.

Second charge loans are secured loans held separately from your mortgage. You will make two sets of monthly payments secured against your home.

For example, your mortgage is cleared first if you sell your home, and your secured loan is cleared second.

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How much can I borrow?

The amount you can borrow depends on several factors, including:

1. Your situation.
2. The lender’s criteria.
3. The value of your property.
4. How much equity you have (equity is the sum you have left after deducting your outstanding mortgage from the value of your house).

You can expect to go through affordability checks. Lenders perform these because they want assurance that you can afford the repayments, even if situations change and interest rates increase or if your income decreases.

Secured loans commonly start at £10,000. However, you can borrow more with a secured loan than a personal loan because the lenders have the security of your property as collateral.

As a result, they can take over your property and sell it off to reclaim funds if you default on the loan.

Mortgage lenders can offer roughly four times your annual earnings.

However, keep in mind that you don’t have to accept the offered amount. Instead, determine whether you can afford to repay the loan and don’t get yourself in a financial dilemma.

Things to consider before taking out a secured loan

• Determine how much you need to loan and for how long.
• Find out how much you can afford to pay monthly for the entire term of the deal.
•  Compare different loans to find the best deal, including fees, interest, and charges.
• If you are loaning to consolidate debts, estimate whether it will cost you more by spreading the payments.
• See if you can improve your credit score and get your application accepted at the best rate.
• Don’t create many applications at once, which will give the impression that you are struggling financially and risk not being accepted.
• Use an eligibility checker to determine the likelihood of getting accepted before applying.

Things to consider before remortgaging

• Determine how much you need to loan and for how long.
• Find out how much you can afford to pay monthly for the entire term of the deal.
• Weigh the cost of remortgaging against your current mortgage or a secured loan, including interest and early repayment charges.
• If you are loaning to consolidate debts, estimate whether it will cost you more by spreading the payments.
• See if you can improve your credit score and get your application accepted at the best rate.
• Refrain from applying for credit in the months leading up to your remortgage application. It will give the impression that you are struggling financially and risk not being accepted.
• Use an eligibility checker to determine the likelihood of getting accepted before applying.
• Study comparison, or you might also want to speak to a financial advisor who can understand your case and find you the best deal.

Check Today's Best Rates >

Should you get a secured loan or remortgage?

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

An individual voluntary agreement (IVA) is a suitable solution if you’ve found yourself in overindebtedness.

It’s a legally binding and formal agreement between you and your creditors to repay all or part of your debt over a specified time.

To ensure you don’t worsen your situation and can consistently make monthly IVA payments, IVAs come with certain conditions you must accept, including restrictions on taking out further loans.

Let’s explore how you can secure a loan with an IVA.

Can I Take Out Loans During An IVA?

While your IVS is ongoing, you can’t borrow more than £500 without permission from your insolvency practitioner (IP), who sets up and manages the IVA.

The restriction includes both formal and informal loans.

You must contact your IP if you need a loan greater than £500 when faced with a sudden expense or emergency. They’ll need you to explain why you need the loan and discuss your options with them. If your IP feels that the loan is warranted, they’ll permit you.

The restriction ensures you don’t get into further debt and keeps your IVA running smoothly. You’ll be going against the IVA terms if you take out a loan larger than £500 without the permission of your IP. You risk termination of your IVA if you do, and you can face legal action against you.

Check Today's Best Rates >

Will The IVA Affect My Credit Rating?

Details of your IVA will remain in your credit file for six years from the date the IVA starts, and this will negatively impact your credit rating. Even with permission from your IP, you’ll find it difficult to access credit in the short term.

Details of IVAs remain in a public register called the Individual Insolvency Register for the length of the IVA. Anyone can check this register, including lenders, when you make a loan application.

It may be hard finding a lender willing to lend to you since having an IVA means you’re already struggling with debts. Even if you do, they’ll likely charge high interest rates and include some string terms.

Traditional and high street lenders like banks will likely reject your application automatically once you fail their credit check. You’ll have better chances with specialised lenders who provide loans to borrowers with bad credit, and you can only access them through lending brokers and advisers with a whole of market access.

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

IVA Early Settlement Loan

There are occasions where you may be able to settle your IVA early with a full and final settlement and free yourself from its constraints. Usually, after three years of the IVA, you can get a loan to pay your IVA off early. It releases you from the IVA and helps build up your credit score.

You’ll need to offer your creditors one lump sum and ask them to agree that no further monthly payments will be required from you once you pay. Although your IVA will be considered complete, keep in mind that:

• The IVA will remain in your credit file for six years from the start of the IVA.
• You may still find it difficult to access loans and credit options straight away.
• You’ll have to repay the loan you take out to settle the IVA early.

You’ll need to inform your IP that you wish to settle your loan early and discuss it with them. If your IP feels the offer is reasonable and likely to be accepted by your creditors, they’ll arrange a variation meeting. It’s usually proposed when changes need to be made on the original terms of the arrangement.

You must be clear and transparent in your proposal about where the money is coming from to assure them it’s from a legitimate source and not included in your IVA like your inheritance. Similar to the original IVA proposal, 75% of your creditors by value must agree to your lump-sum offer for it to go ahead.

Various lenders offer IVA early settlement loans, and you can contact them once you have permission from your IP and creditors. You’ll find that they have criteria you must fulfil to be eligible, like the amount of time the IVA has been active, any current arrears or the number of missed IVA payments.

Check Today's Best Rates >

How Much Would I Need To Settle My IVA Early?

The amount needed to settle the IVA arrangement will be different for each individual because no two IVAs are the same. The amount can depend entirely on how much is left on the arrangement, and it may be up to your creditors.

It’s wise to aim for offers as close to the amount you owe as possible. It’s up to your creditors whether they accept your offer, and you must ensure the early settlement does not disadvantage them. If creditors reject your early settlement offer, you’ll simply continue making IVA payments as originally agreed.

Other Funds That Can Settle Your IVA Early

Money gifted by a friend or family member can also settle the IVA early. A lump sum provided by a third party to settle the IVA early is usually accepted. You’ll need to discuss it with your IP and provide some information about them before they approach your creditors, and this can include their ID, consent and proof of funds.

Note that windfalls received during your IVA are normally paid into the arrangement in full. Such injection of extra funds doesn’t automatically reduce your IVA length, and you’ll continue making monthly payments.

However, depending on the amount you can pay as a lump sum, the length of your IVA can reduce, especially if you’re able to pay your creditors back in full plus the IP fees. A variation meeting isn’t necessary for such scenarios, and you can simply complete your IVA.

Can I Borrow From Friends And Family During My IVA?

The same rules apply for informal loans, and you’ll be restricted from borrowing above £500 during your IVA, even if it’s from friends and family. If you can’t make do without a loan, then you can talk to your IP for permission and guidance.

Borrowing from family and friends is usually discouraged during the IVA because it can easily impede the progress of your IVA. You’ll likely show preferential treatment towards them and pay them back first, which can upset the other creditors and cause your IVA to fail.

Securing A Loan As A Homeowner During Your IVA

As a homeowner with equity in your property, you may be required to remortgage in the final year of the IVA. Your home’s value is usually taken into account as part of your IVA, and in the final year, you must get a valuation to determine how much equity is in it.

If the valuation shows more than £5000 equity in the property, you’ll be required to remortgage to raise a lump sum that goes into the IVA. However, you’ll not be required to sell your home.

The IVA places a limit on the amount you’re expected to raise by remortgaging based on the value of your home and the amount of mortgage you already have. If the new mortgage would extend beyond the existing mortgage or your state retirement age, then you’re not expected to remortgage.

You’ll simply continue making the usually monthly IVA payments for the remaining twelve months if you can’t remortgage.

Secured Loan With IVA Final Thoughts

Getting a loan with an IVA can be challenging and even impossible at times. It’s only advisable when there’s no other choice, and you simply need to contact your IP for advice and permission for loans above £500.

Give Mortgageable a call today at 01925 906 210 or contact us to speak to one of our friendly advisors.

If you’re grappling with substantial debt, an Individual Voluntary Agreement (IVA) might be the lifeline you need.

This legally binding arrangement forms a structured pact between you and your creditors, designed to clear all or a portion of your debts within a specific timeframe.

Committing to an IVA is a serious decision that comes with stipulations aimed at ensuring your financial recovery.

These conditions include adhering to a manageable monthly repayment plan and refraining from incurring additional debts.

It’s crucial to fully understand and comply with these terms to successfully navigate your path out of debt.

Navigating the complexities of securing a loan while under an IVA can be challenging, but not impossible.

Let’s delve into the details of how you can approach this responsibly and make informed decisions about your financial future.

Can I Take Out Loans During An IVA?

While your IVS is ongoing, you can’t borrow more than £500 without permission from your insolvency practitioner (IP), who sets up and manages the IVA.

The restriction includes both formal and informal loans.

You must contact your IP if you need a loan greater than £500 when faced with a sudden expense or emergency.

They’ll need you to explain why you need the loan and discuss your options with them. If your IP feels that the loan is warranted, they’ll permit you.

The restriction ensures you don’t get into further debt and keeps your IVA running smoothly.

You’ll be going against the IVA terms if you take out a loan larger than £500 without the permission of your IP.

You risk termination of your IVA if you do, and you can face legal action against you.

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Will The IVA Affect My Credit Rating?

Details of your IVA will remain in your credit file for six years from the date the IVA starts, and this will negatively impact your credit rating.

Even with permission from your IP, you’ll find it difficult to access credit in the short term.

Details of IVAs remain in a public register called the Individual Insolvency Register for the length of the IVA. Anyone can check this register, including lenders, when you make a loan application.

It may be hard finding a lender willing to lend to you, since having an IVA means you’re already struggling with debts.

Even if you do, they’ll likely charge high-interest rates and include some string terms.

Traditional and high street lenders like banks will likely reject your application automatically once you fail their credit check.

You’ll have better chances with specialised lenders who provide loans to borrowers with bad credit, and you can only access them through lending brokers and advisers with a whole of market access.

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

IVA Early Settlement Loan

There are occasions where you may be able to settle your IVA early with a full and final settlement and free yourself from its constraints.

Usually, after three years of the IVA, you can get a loan to pay your IVA off early. It releases you from the IVA and helps build up your credit score.

You’ll need to offer your creditors one lump sum and ask them to agree that no further monthly payments will be required from you once you pay.

Although your IVA will be considered complete, keep in mind that:

• The IVA will remain in your credit file for six years from the start of the IVA.
• You may still find it difficult to access loans and credit options straight away.
• You’ll have to repay the loan you take out to settle the IVA early.

You’ll need to inform your IP that you wish to settle your loan early and discuss it with them.

If your IP feels the offer is reasonable and likely to be accepted by your creditors, they’ll arrange a variation meeting.

It’s usually proposed when changes need to be made to the original terms of the arrangement.

You must be clear and transparent in your proposal about where the money is coming from to assure them it’s from a legitimate source and not included in your IVA like your inheritance.

Similar to the original IVA proposal, 75% of your creditors by value must agree to your lump-sum offer for it to go ahead.

Various lenders offer IVA early settlement loans, and you can contact them once you have permission from your IP and creditors.

You’ll find that they have criteria you must fulfil to be eligible, like the amount of time the IVA has been active, any current arrears or the number of missed IVA payments.

Check Today's Best Rates >

How Much Would I Need To Settle My IVA Early?

The amount needed to settle the IVA arrangement will be different for each individual because no two IVAs are the same. The amount can depend entirely on how much is left on the arrangement, and it may be up to your creditors.

It’s wise to aim for offers as close to the amount you owe as possible.

It’s up to your creditors whether they accept your offer, and you must ensure the early settlement does not disadvantage them.

If creditors reject your early settlement offer, you’ll simply continue making IVA payments as originally agreed.

Other Funds That Can Settle Your IVA Early

Money gifted by a friend or family member can also settle the IVA early. A lump sum provided by a third party to settle the IVA early is usually accepted.

You’ll need to discuss it with your IP and provide some information about them before they approach your creditors, and this can include their ID, consent and proof of funds.

Note that windfalls received during your IVA are normally paid into the arrangement in full.

Such injection of extra funds doesn’t automatically reduce your IVA length, and you’ll continue making monthly payments.

However, depending on the amount you can pay as a lump sum, the length of your IVA can reduce, especially if you’re able to pay your creditors back in full plus the IP fees.

A variation meeting isn’t necessary for such scenarios, and you can simply complete your IVA.

Can I Borrow From Friends And Family During My IVA?

The same rules apply for informal loans, and you’ll be restricted from borrowing above £500 during your IVA, even if it’s from friends and family. If you can’t make do without a loan, then you can talk to your IP for permission and guidance.

Borrowing from family and friends is usually discouraged during the IVA because it can easily impede the progress of your IVA.

You’ll likely show preferential treatment towards them and pay them back first, which can upset the other creditors and cause your IVA to fail.

Securing A Loan As A Homeowner During Your IVA

As a homeowner with equity in your property, you may be required to remortgage in the final year of the IVA. Your home’s value is usually taken into account as part of your IVA, and in the final year, you must get a valuation to determine how much equity is in it.

If the valuation shows more than £5000 equity in the property, you’ll be required to remortgage to raise a lump sum that goes into the IVA. However, you’ll not be required to sell your home.

The IVA places a limit on the amount you’re expected to raise by remortgaging based on the value of your home and the amount of mortgage you already have.

If the new mortgage would extend beyond the existing mortgage or your state retirement age, then you’re not expected to remortgage.

You’ll simply continue making the usually monthly IVA payments for the remaining twelve months if you can’t remortgage.

Secured Loan With IVA Final Thoughts

Getting a loan with an IVA can be challenging and even impossible at times. It’s only advisable when there’s no other choice, and you simply need to contact your IP for advice and permission for loans above £500.

Give Mortgageable a call today at 01925 906 210 or contact us to speak to one of our friendly advisors.

Secured loans involve providing a valuable asset or property as collateral for loan repayments, and lenders may require various documents as proof of ownership, income, and affordability.

It’s crucial to have everything you need ready to avoid delays and expedite the process.

Let’s explore everything involved in applying for a secured loan in the UK.

Information Needed For Secured Loan

The lender will need a few details to confirm you’re eligible for a secured loan.

These include:

• Details of the property you’re using as security, such as the valuation or address
• Your full name and proof of ID, date of birth, and address
• Your monthly income
• Your employment status, whether it’s self-employed, full-time, or part-time
• Affordability through your income and outgoings and how you’re going to repay, whether it’s through rent, income, or sale

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How Secured Loan Applications Work

With secured loans, you can borrow money against the value of a property you own or are looking to buy. You can use the house you live in to secure the loan in the form of a second mortgage, especially if you need to raise funds for things like home improvements, debt consolidations, or other financial needs.

A secured loan can also involve a buy-to-let mortgage where you buy a property intending to rent it to tenants. It’s wise to consider how much you can comfortably repay without financial strain before borrowing because the loan is always secured against the property.

Once you qualify, the lender places a lien on your property, giving them a legal right to seize it if you default. If you fail to repay or fall back on repayments, the lender can repossess the property and sell it as a last resort to recover the loan.

You risk losing your home or property, so you should never take out more than you can afford.

Secured Loan Process

The process of getting a secured loan usually involves the following steps:

Fact-Finding

Most secured loan processes usually start with fact-finding, where the lender confirms your basic details, including your name, address, date of birth, employment details, property type, and loan requirements.

The lender assesses whether the loan is appropriate for you and ascertains that you meet the basic requirements before requesting more information.

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

Searches

Although a secured loan is less risky for lenders, it usually requires a hard credit check. Credit searches are performed to assess your creditworthiness and how well you’ve handled or repaid loans or credit in the past.

Apart from credit searches, a land registry check is also performed on the property you’re eyeing to determine whether any potential issues exist that can affect the loan.

The findings from such searches can influence the terms of the deal, and the lender may make adjustments resulting in higher or lower interest rates and loan to value ratio (LTV).

Valuations

These involve determining the value of the property in question, and you can arrange it yourself, or the lender can do it. Nowadays, most valuations are done automatically using different technologies. However, some need to be done manually, which involves site visits by surveyors.

Depending on the property location and availability of the surveyor, it can take a few days plus a few more to write up and confirm the report. Such valuations enable the lender to determine the loan to value (LTV) ratio, which is the ratio of the loan to the property’s value.

Final Checks and Documents

The lender needs to conduct various checks at the final stage. It may also include their solicitors and senior management, who conduct quality checks or fraud checks before lending to you.

Once this is done, they’ll likely send you an agreement to review and sign. After the process is complete, the lender will transfer the funds into your account.

How Long Does It Take To Get A Secured Loan?

Depending on the lender and how quickly you respond and provide the required information, getting a secured loan can take 2 to 4 weeks. You can find lenders who offer an entirely online process from application to disbursement, expediting the process.

Others still prefer receiving and sending out documents through the post, requiring more time. The time required can depend on how quickly you can get the necessary documents signed and delivered to the lender. It can also depend on how long the lender needs to process your application and perform the required checks.

Some lenders provide borrowers with a seven-day reflection period. You’re given seven days from the day of your application to change your mind and back out without incurring any charges.

Secured Loans Vs. Unsecured And Personal Loans

Unlike secured loans, unsecured and personal loans don’t require you to provide any property or asset as collateral for loan repayments. Lenders mainly concentrate on your affordability and creditworthiness when determining your eligibility.

Your monthly income and expenditures determine such affordability. Your credit and income are vital for approving unsecured loans, and you’ll need to show proof of consistent employment and income. However, some specialist lenders also consider those with bad or non-existent credit provided they can afford the requested amount.

Unsecured and personal loans usually take shorter processing and payout than secured loans because no property valuations and checks are required. They also feature less paperwork, and you can have your application approved in a matter of minutes and paid out in a few hours!

Is It A Must I Own The Property To Get A Secured Loan?

No. Secured loans work by using equity, which is the amount of the mortgage you’ve already paid off, as collateral for the loan. You can borrow based on the equity of the property that you own.

If you’ve already paid off the mortgage and own the property outright, you can borrow more significant amounts with a secured loan and get better terms and interest rates.

The value of your collateral should be greater or equal to the loan amount to be accepted. It ensures the lender can recover the loan amount if you default or fail to make repayments.

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How Property Type Can Affect A Secured Loan

Lenders will have different policies and requirements depending on the property you have or want to get. Specific residential categories can have more challenges than others, involving more paperwork or higher deposits for the loan or mortgage.

A 20% deposit is usually standard for attractive secured loan deals when buying properties, which would involve an 80% LTV ratio. However, if the lender considers the property higher risk, they’ll require you to come up with a higher deposit.

For example, if you’re looking for a secured loan for newly built homes, you may face certain restrictions where the lender requires you to work with particular construction firms or builders.

Properties with non-standard constructions may also present additional challenges that require more documentation and paperwork. Such properties include:

• Ex local authority properties
• Properties above other commercial properties
• Properties are constructed unusually, such as those with thatched roofs or pre-fabrications
• Studio flats or apartments that are very high rise
• Properties where hazardous materials like asbestos are used in the construction

You may find it challenging to access suitable secured loan deals with such properties, meaning you may get higher interest rates or need a higher deposit.

What Documents Do I Need For A Secured Loan? Final Thoughts

It’s vital to consider the risks involved in secured loans because you can lose your home if you fail to repay.

Ensure you only borrow based on your affordability and accurately provide all the information the lender needs.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.

Loans and other credit options usually fall under two main categories, secured and unsecured.

The main difference is the presence or absence of collateral, a form of security for the lender against non-repayment by the borrower.

Here’s everything you need to know.

What Is A Secured Loan?

A secured loan involves borrowing money against an asset you own.

The asset acts as security or collateral that the lender can repossess to recover the advanced amount if you can’t repay the loan.

Most lenders use property like your house as security. You can also secure a loan on other valuable things like your car, electronics, expensive jewellery, or other assets.

Lenders face less risk with secured loans because they can use the asset to recover their funds if they default.

They’re more willing to advance higher loan amounts and low interest rates because they know you’ll be motivated to repay to avoid losing your asset.

Lenders will place a lien on the asset you use as security, giving them the legal right to repossess it if you default. When you fall back on repayments or default, they can repossess your asset and sell it as a last resort to recover the advanced amount.

A lender will require that the asset’s value be greater or equal to the advanced amount to ensure they can recover the loan amount if necessary.

They’ll also need it to be maintained or insured under certain specifications to maintain its value. It can include having home insurance for properties used in mortgages or car insurance coverage for auto loans.

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

Pros And Cons Of Secured Loans

Pros

• You can borrow larger amounts
• Longer repayment periods can translate to lower monthly repayments
• They feature low-interest rates
• Easier to qualify for even if you’re self-employed or have a bad credit history

Cons

• You can easily lose your home or asset if you fail to repay
• Some secured loans feature variable interest rates, which can increase your monthly repayments
• You may end up paying more interest overall because of the extended repayment period.
• They can feature other costs like arrangement fees or other set-up costs you have to factor in when working out the loan’s total cost.

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Types Of Secured Loans

Homeowner or home equity loans

These refer to loans secured against your home and involve large sums you repay over long periods of 3 to 25 years.

Logbook loans

They’re secured against your car, and you can borrow 50% or more of your vehicle’s value. They can have high-interest rates and last up to 5 years.

First and second charge mortgage

First charge mortgages are loans taken out when you have no existing mortgage. Second charge mortgages involve setting up a separate agreement from your existing mortgage with the same lender or a different one.

Vehicle finance

These loans are secured against a vehicle you’re looking to purchase but don’t already own through a finance agreement. It can last from one to five years, and you’ll only own the vehicle after you’ve made the final payment.

What Is An Unsecured Loan?

Unsecured loans are cash loans that don’t require you to provide your assets as collateral or security. You simply borrow money from the lender as a lump sum and agree to repay the amount plus interest over a pre-agreed time frame.

Because there’s no security involved, they tend to feature higher interest rates, and you can incur additional charges if you make late repayments of miss one. How much an unsecured loan will cost you will depend on how risky a borrower the lender considers you to be.

It’s usually referred to as risk-based pricing and can be influenced by things like:

• The amount you want to borrow
• The period you need for repayments
• Your income
• Your credit history

Although the risk is lower for the borrower, it doesn’t mean you can default without consequences. The lender can initiate legal actions against you to recover the loan amount, and your credit score will be impacted negatively when you miss repayments.

Pros and Cons Of Unsecured Loans

Pros

• Offer more flexibility than secured loans
• The borrower faces no risk to their property or assets
• They feature quick application and approval that provide quick funds in a hurry

Cons

• You need good creditworthiness to qualify for the best rates in the market
• They can be more expensive than secured loans
• They often feature smaller loan amounts than secured loans

Types of Unsecured Loans

Personal loans

These allow you to borrow a lump sum that you repay in instalments over a pre-agreed time frame. You can use the funds however you like without restriction.

Guarantor loans

These involve incorporating the help of a responsible friend or relative who agrees to repay the loan when you can’t. They’re suitable if you’ve found it difficult to get approved for a loan independently. The guarantor must have a good credit history and stable finances to qualify.

Cash advances

A cash advance is a short-term loan where you get a portion of your next income before receiving it. It usually features small amounts that provide you with some bridging cash to make it to the end of the month. They’re usually repaid within a few days or weeks on the day you get paid.

Risks Of Secured And Unsecured Loans

Both secured and unsecured loans come with certain risks. These include:

• If you miss repayments, make late repayment or default, you can damage your credit score.
• You may be tempted to borrow larger amounts than you can afford, which can put you in financial strain or hardship as you struggle to repay.
• You may incur late fee penalties if you make late repayments or early settlement fees if you pay off the loan early. Ensure you carefully understand the terms of the deal to avoid penalties.
• Legal action can be taken against you if you default on the loan. You’ll be considered to have defaulted if you miss payments for three to six months.

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Should I Choose A Secured Or Unsecured Loan?

Picking the right loan option for you can make borrowing easier, cheaper and lower risk. Various things to think about include:

• Why do you need to borrow

Why you need the money and how you intend to use it can determine the right loan option for you. For example, the right loan to buy a home will always be a mortgage. Other reasons you may need a loan include buying a car, consolidating debt, financing a holiday, or making a large purchase.

• How much do you need

The amount you require can also determine the appropriate loan for you. Generally, secured loans offer larger amounts and are a great option if you want to borrow more, while unsecured loans offer small amounts that are easier to repay.

• How long do you need to pay back?

Most secured loans offer longer repayment periods than can go over ten years. With unsecured loans, you’ll get from one to seven years, but some lenders are flexible and can offer longer periods.

Unsecured loans are excellent if you plan to pay the amount back quicker. Remember, the longer the period, the more interest you’ll pay overall. You’ll also need to make higher monthly repayments with shorter periods.

• Your circumstances

Situations like having bad credit or being self-employed can limit the number and types of loans you can access. A strong or positive credit history allows you to choose from all kinds of loans.

Secured And Unsecured Loans Final Thoughts

Whether you’re taking out a secured or unsecured loan, you must carefully consider your circumstances and how much you can realistically afford. When possible, unsecured loans are usually the best option because they feature less risk to your home and assets.

Give Mortgageable a call today at 01925 906 210 or contact us to speak to one of our friendly advisors.

Getting rejected for a loan can be discouraging, especially when you’re in urgent need of funds.

There can be many reasons why this can happen, and it’s essential to understand why before making any other credit applications to avoid damaging your credit history.

While some lenders will tell you why your application was rejected, they don’t always have to, even when you ask.

Let’s explore some common reasons why loans are denied and what you can do to get your next application approved.

A Poor Credit Rating

Nearly all licensed, reputable lenders will look into your credit as part of your loan application assessment.

Your credit rating is essential in getting your loan approved since it tells the lender how you’ve handled credit in the past.

A low score is usually a red flag for many lenders, and it’s wise to check your credit score to see where you stand before applying for a loan.

Sites like ClearScore or Experian allow you to check your credit score for free.

Although all bad credit is pooled into one, there can be varying levels of bad credit.

You may have defaulted on a past loan, or you simply applied for too many loans in the past.

Depending on the issue, you can find specialised lenders who help borrowers with a less-than-perfect credit history.

Related quick help guides: 

• Secured loans brokers.
• Secured loans for pensioners.
• Secured loans for self employed.
• Interest only secured loans.
• Can I get a secured loan on a buy to let property? 
• Secured business loans.

Insufficient Income

Responsible lending requires that lenders only advance loans you can afford to pay back without getting into financial hardship.

Such affordability is usually assessed by looking at your income and monthly expenditures. You’ll have little chance of approval if you apply for a large loan with a low or inconsistent income.

Ensure you only apply for loans you can afford to repay based on your income and outgoings.

Work out the repayments for the amount you’re applying for to determine if they’re manageable based on your current income.

Non-existent Credit History

Even without a credit history, lenders will consider you a bad credit borrower.

With a non-existent credit history, lenders have no way of knowing what kind of borrower you are. It’s often the case with young adults who are yet to build their credit history, or you recently moved to the UK and can’t transfer your credit history across borders.

Consistent bill payments or applying for a credit card can help you build your credit history. Some phone companies even report to credit reference agencies, and paying them on time can improve your credit score.

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Outstanding Debts

If you currently have several outstanding debts or loans you’re repaying, it can be alarming to potential lenders, especially if you’ve maxed out your credit. It’s wise to put more effort into reducing your current debts before applying for a new loan.

Errors In Your Credit Report

Mistakes or errors in your credit reference file can lead to automatic rejections among some lenders.

That’s why it’s essential to check your credit report and ask for a copy of your file if possible. If you spot any mistakes, you can write to the credit reference agency and ask them to correct them.

You may be required to provide enough evidence to support your case, and within 28 days, the issue on your report will be investigated.

Excessive Loan Applications

If you’ve been consistently making loan applications even while getting rejected, you’ve probably been damaging your credit without knowing. Recurrent applications look bad, regardless of whether it’s to the same lender or different ones.

Successful and unsuccessful applications register search markers on your credit file. You shouldn’t keep making applications once you’re rejected before remedying the causes. You can also restrict yourself to lenders who only conduct soft credit searches that don’t appear on your credit file.

Actions To Take If You Can’t Get A Loan

Improve Your Credit History

Your credit history is one of the most likely reasons you can’t get a loan. Improving your credit score before you apply for a loan can significantly improve your chances of approval. You can do this by:

• Taking out small amounts you can quickly repay on your credit card and repaying on time without fail.
• Register the electoral roll as a voter. It can help in your verification among credit reference agencies.
• Have utility bills in your name, even if you’re sharing a house with others.
• Set up direct debits for bills to ensure they’re always paid on time without delays.

Reduce Any Outstanding Debts

Try to reduce or pay off any existing debts before applying for a new loan. Existing debt is another common reason why borrowers can’t get a loan because lenders may not believe you can handle paying off too many debts at the same time. Consider how you can plan and budget better to pay off all your obligations or find alternative sources of income.

Find Alternative Sources Of Funds

Don’t make more applications once you’ve been rejected. Multiple applications damage your future credit chances, and it’s better to find an alternative source for the funds you need. Selling off old items, borrowing from a friend or family member, or starting a side hustle can provide an alternative avenue for cash flow.

Find Specialised Lenders

Nowadays, you can find lenders who specialise in helping all kinds of borrowers in the UK. Specialised lenders will consider your application and approve your request whether you have low income, bad credit, or no credit history.

Instead of concentrating on your credit history, such lenders focus on your affordability based on your income and expenditures. They provide personalised offers suitable to your circumstances to help you get the funds you need.

You’ll not find such lenders advertised and your best bet to access them is through brokers and advisers. They can help you find suitable lenders who will likely approve your request based on your circumstances, and this saves you both time and money.

The best part is that you get access to loans without worrying about your credit score, which will help improve your credit when you repay on time.

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Provide Security

Having security involves providing a valuable asset used as collateral for the loan. With security, the risk to the lender is significantly reduced. If you fail to repay the loan, the lender can repossess the asset and sell it as a last resort to recover any outstanding balance.

The lender knows you’ll be motivated to repay to avoid losing your asset and will be more than willing to advance the loan regardless of your credit history. Assets you can use as security include your home, car, stocks, electronics and equipment or valuable jewellery.

Remember, you risk losing your assets when you default, so only borrow what you can afford to repay.

Incorporate A Guarantor

If you’ve found it challenging to get approved for a loan independently, a guarantor can help open the doors to borrowing for you. Having a guarantor involves incorporating a responsible person in your life in the loan application. It can be a trusted friend or family member with a good credit history and stable finances.

The guarantor agrees to repay the loan when you can’t, effectively ‘guaranteeing’ the loan and reducing the risk for the lender. With a guarantor, you can find better deals and terms than if you applied for the loan on your own. Since it’s such a big ask to a family member or friend, it’s vital you only borrow what you can afford to avoid getting them into trouble.

Why Can’t I Get A Loan? Final Thoughts

The lending world has made great leaps and bounds to provide all UK residents with access to financing despite their borrowing history.

Most online lenders are very flexible, and a lending broker or adviser can help you find a suitable solution based on your circumstances.

Give Loanable a call today on 01925 988 055 and they will provide you with the best deals available to meet your circumstances and consider any credit history you may have. With their expert advice, they can guide you through the process and give you the knowledge and confidence it takes to acquire a secured loan that is right for you.

If you have read all the information on secured loans carefully and feel that you want to proceed with a secure loan, get in touch with one of Loanable’s secured loan experts by emailing hello@loanable.co.uk who can work with you to find the best deal for your needs and circumstances.